A global financial markets infrastructure business Annual Report 31 December 2019 LSEG Who we are London Stock Exchange Group is a global financial markets infrastructure business. We provide valuable services for a wide range of customers, focusing on Data and Analytics, on Risk, Collateral and Processing Solutions, and on Capital Formation and Trade Execution. Further information on London Stock Exchange Group can be found at: www.lseg.com London Stock Exchange Group plc 10 Paternoster Square London EC4M 7LS Telephone: +44 (0)20 7797 1000 Registered in England and Wales No. 5369106 Our vision Contents To become the leading global financial markets infrastructure group. STRATEGIC REPORT An overview of our business, our strategy and the markets and regulatory environment in which we operate, including statements from our Chair and CEO, Our purpose followed by more detail on each of our divisions, our performance, how we consider our wider responsibilities and the principal risks that could affect our business. We support global financial stability Sign-off for the Strategic Report is provided in the and sustainable economic growth by Directors’ Report on page 132. Highlights 2 enabling businesses and economies Chair’s statement 4 CEO’s statement 6 to fund innovation, manage risk What we do – our business model 10 Overview of Group activities 12 and create jobs. Market trends and our response 14 Strategy in action 21 Executive management team 24 Segmental review 26 Information Services 27 Post Trade Services – LCH 30 Post Trade Services – CC&G and Monte Titoli 33 Capital Markets 35 Technology Services 39 Supporting sustainable growth 40 Board engagement with stakeholders 51 How the Board has complied with Section 172(1) of the Companies Act 2006 52 Financial review 53 Principal risks and uncertainties 60 GOVERNANCE An introduction to our Board of Directors, our approach to corporate governance, the reports of committees of the Board and how we reward performance, along with other statutory and regulatory information. Board of Directors 75 Corporate governance 78 Complying with the provisions of the Code 85 Report of the Nomination Committee 88 Report of the Audit Committee 90 Report of the Risk Committee 96 Directors’ Remuneration Report 98 Directors’ Report 129 Statement of Directors’ responsibilities 133 Independent Auditor’s Report to the members of London Stock Exchange Group plc 134 GROUP FINANCIAL STATEMENTS Detailed financial information setting out our performance for the reported 12 month period and financial position at year end. Consolidated income statement 143 Consolidated statement of comprehensive income 144 Balance sheets 145 Cash flow statements 147 Statements of changes in equity 148 Notes to the financial statements 150 SHAREHOLDER INFORMATION A glossary of terms used in this report and other information for shareholders. Glossary 204 Investor Relations and financial calendar 207 London Stock Exchange Group Annual Report December 2018 Highlights The figures in the graphs below are for the Group on a continuing basis, so exclude businesses classified as discontinued during the periods shown. Percentages are based on 2019 compared with 2018. Total income Adjusted operating profit* £ m £ m 2,314 1,065 2,135 1,955 931 1,657 +8% 812 +14% 1,419 686 585 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Operating profit Adjusted basic earnings £ m per share (pence)* 751 738 200.3 626 173.8 (2%) 148.7 +15% 124.7 404 427 103.4 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 Basic earnings Dividends per share (pence) per share (pence) 153.6 70.0 138.3 60.4 119.5 (14%) 51.6 +16% 43.2 74.8 36.0 63.8 2015 2016 2017 2018 2019 2015 2016 2017 2018 2019 The graphs show full 12 month figures on a December year-end basis. There have been no businesses classified as discontinued during 2019 or 2018. 12 months to 12 months to Year ended 31 December 31 December 2019 31 December 2018 Total Variance Total income £2,314m £2,135m 8% Adjusted operating profit1 £1,065m £931m 14% Operating profit £738m £751m (2%) Adjusted profit before tax1 £994m £865m 15% Profit before tax £651m £685m (5%) Basic earnings per share 119.5p 138.3p (14%) Adjusted basic earnings per share1 200.3p 173.8p 15% 1. London Stock Exchange Group uses non-GAAP performance measures as key financial indicators as the Board believes these better reflect the underlying performance of the business. As in previous years, adjusted operating profit, adjusted profit before tax and adjusted basic earnings per share all exclude amortisation and impairment of purchased intangible assets and goodwill and non-underlying items London Stock Exchange Group plc 2 Annual Report 31 December 2019 Strategic Report Highlights Group Total Income by segment 12 months to 31 December 2019 £m Information Services 902 Post Trade Services LCH 756 Post Trade Services CC&G and Monte Titoli 152 Capital Markets 426 Technology Services 66 Other 12 2,314 LSEG produced a good financial performance with Post Trade Services – CC&G and Monte Titoli revenue growth in all core business divisions as the – Income up 5% to £152 million Group continued the successful execution of its (2018: £145 million) on a reported basis and by 6% on a constant currency basis strategy. Key headlines are provided below: – Net Treasury Income up 14% to £49 million (2018: £43 million), and up 15% on a constant currency basis Information Services – Notional cleared for fixed income products rose 26% to – Revenue up 7% to £902 million (2018: £841 million) on a reported €25 billion (2018: €20 billion) basis, and up 5% on organic and a constant currency basis – Number of equity and derivative contracts cleared 2019: – FTSE Russell revenues up 10% to £649 million (2018: £592 99.5 million (2018: 111.9 million) million), and up 6% on a constant currency basis – 2017-2019 target for FTSE Russell double-digit revenue growth Capital Markets each year, achieved in 2019 with 10% – Revenues up 5% to £426 million (2018: £407 million) on both a reported basis and constant currency basis – ETF assets benchmarked to FTSE Russell indices at the end of 2019: US$765 billion (at end of 2018: US$606 billion) – Primary Markets revenue increased by c.£32 million in H1 2019 due to a one-off change in estimate relating to IFRS 15. Adjusting – Launch of the Climate WGBI, based on risk modelling from for this, Primary Markets revenue for the year rose 6% Beyond Ratings, a business acquired in the year – 109 new companies joined our markets in the year (2018: 176) Post Trade Services – LCH – Capital raised by new and further equity issues 2019: £23.4 billion – Income up 14% to £756 million (2018: £662 million) (2018: £28.7 billion) – LCH 2017-2019 target for c.50% adjusted EBITDA margin – UK cash equity average daily value traded decreased by 18% achieved, with 54.9% margin for 2019 to £4.7 billion – 2017-2019 target for LCH OTC double-digit revenue growth each – Borsa Italiana cash equity average daily number of trades year, achieved in 2019 with 15% decreased by 10% to 255,000 – Net Treasury Income for LCH in 2019 increased by 18% to £206 – Turquoise average daily value traded decreased by 36%, million (2018: £175 million) on a reported basis and up 17% on a Turquoise Plato Block Discovery value traded increased 11% to constant currency basis €103 billion (2018: €93 billion) – SwapClear total notional cleared surpassed US$1.2 quadrillion, up Technology Services 14%, with client trades cleared up by 13% to 1.7 million and Note: Organic growth is compression up by 19% to US$920 trillion – Technology revenue up 2% to £66 million (2018: £65 million) calculated in respect of on a reported basis and up 1% on a constant currency basis businesses owned for at least – ForexClear launched clearing for deliverable FX forwards. 12 months in either period and Membership increased to 34 (2018: 32) – Millennium’s Post Trade product selected by the Securities so excludes Beyond Ratings. Clearing Corporation of the Philippines to improve its post The Group’s principal foreign – RepoClear saw record nominal cleared with €106 trillion cleared in exchange revenue exposure trade processes arises from translating our 2019, an increase of 7% from 2018 and successfully consolidated European based Euro and US a large majority of Euro debt clearing into LCH SA – Successfully implemented Millennium Exchange and Millennium based USD reporting Surveillance platforms for the Johannesburg Stock Exchange businesses into Sterling London Stock Exchange Group plc Annual Report 31 December 2019 3 Chair’s statement “ The Group plays a significant role in financial markets globally” Don Robert Chair Overview HKEX It was a great honour to be asked to serve as Chair of London Stock In September, LSEG received an unsolicited approach from Hong Exchange Group, an iconic institution with a 300-year history at Kong Exchanges and Clearing Limited (HKEX). LSEG’s Board had the heart of global financial markets. I would like to extend my fundamental concerns about the key aspects of the Conditional appreciation to the previous Chair for handing over the reins Proposal: strategy, deliverability, form of consideration and value, to a Group that is well positioned strategically and financially. especially when compared to the significant value we expect to The Group continues to perform well with total income up 8%, create through our planned acquisition of Refinitiv. Accordingly, adjusted earnings per share up 15% and a proposed dividend the Board unanimously rejected the Conditional Proposal, which of 70.0 pence per share, up 16%. HKEX subsequently withdrew. 2019 has been characterised by macroeconomic and political Governance uncertainty. The challenges posed to all business leaders The Board seeks to operate to high governance and ethical throughout the year have been numerous, but LSEG remains standards.